Asia condensate supply to tighten on Iran sanctions

Japan and South Korean buyers are looking for alternate supplies of high-sulphur condensate to replace term barrels from Iran as Western sanctions make imports from the Opec producer difficult, industry sources said on Thursday. They said South Korea, Japan and other US allies were scrambling to voluntarily reduce Iranian oil imports in the hope they could win waivers from penalties that will be imposed when new US sanctions become effective at the end of June.
The tighter sanctions against Iran, which ban financial institutions from oil deals with the its central bank, are aimed at pressuring Tehran to halt its nuclear programme. "The US is targeting condensate because there are only a few buyers. Crude is very hard to pin point," said Fereidun Fesharaki, chairman of consulting firm FACTS Global Energy, on the sidelines of an industry conference.
Iran produced 370,000 barrels per day of condensate last year, the bulk of which was from South Pars, according to FACTS. Japanese refiners and trading companies have yet to renew their annual Iranian crude and condensate purchase contracts, which expire this month.
In South Korea, Samsung Total Petrochemicals imports about 60,000 tonnes (439,800 barrels) of Iran's Kangan condensate each month and its contract is up for renewal in June, trading sources said. The company's decision on a new contract will largely be based on the outcome of government talks with Washington on a sanctions waiver.
Other countries not directly affected by the sanctions are likely to keep the same level of Iranian condensate imports. Dubai's Emirates National Oil Co, the largest lifter of Iranian condensate, importing up to 3 million barrels a month, is likely to continue its term purchases, the sources said. Similarly, China's Unipec, the trading arm of Asia's largest refiner Sinopec, has renewed its 2012 contract for 75,000 bpd of condensate at an attractive discount of $5 a barrel over the average of Oman and Dubai quotes. That is largely unchanged from 2011.
Asian buyers are seeking to include an "escape" clause in their new term contracts that will allow buyers to declare force majeure on their cargoes if banks, complying with the sanctions, refuse to process payment for the Iranian purchase. "Buyers are pressuring NIOC (National Iranian Oil Company) to include what we call the escape clause," said a source with an Asian buyer that is negotiating the renewal of an annual contract with Iran for oil supply from April.